Clarke was sentenced to 24 months in prison and one year supervised release.  Chief Judge James Rosenbaum ordered Clarke to pay a $2 million fine and a civil fraud penalty of $1,066,910.  Clarke was also ordered to pay the cost of his investigation, prosecution, incarceration, an estimated $1,850 per month, and the cost of his supervised release, an estimated $270 per month.

In addition, as part of his Plea Agreement,  Clarke was ordered to pay $3 million in extraordinary restitution to the State of Minnesota.  The restitution was allocated as follows: $1.5 million to the Minnesota Center for Crime Victim Services; $1.2 million to the Minnesota Financial Crimes Task Force; $300,000 to the Minnesota Gang Strike Force.   Separate from the $6 million in financial sanctions and restitution, Clarke is required to cooperate fully with federal and state tax authorities in paying all his outstanding tax liabilities, including interest.

Clarke, age 58, a former resident of Eden Prairie, MN who now lives in Ft. Myers, Florida,  pled guilty in February 2003 to four counts of filing false tax returns for calendar years 1996-1999.

During his guilty plea hearing, Clarke admitted that between 1997 and 2001 he intentionally underreported his income by more than $3.4 million on his personal federal income tax returns he filed with the Internal Revenue Service.  These false tax returns resulted in a tax loss of approximately $1.4 million.

Assistant United States Attorney Hank Shea commented, “This is the largest personal tax fraud case ever prosecuted in the state of Minnesota and the numbers are almost unbelievable: $1.4 million in lost tax revenue and $3.4 million in unreported income.  In paying the unprecedented restitution, Clarke has recognized that his conduct has hurt all Minnesota.”

Clarke also underreported his income by repeatedly omitting his receipt and use of various items of personal use which were acquired with Katun funds. Many of the items Clarke acquired were used in connection with ranches he owned in Gunnison, CO.  These items included more than 40 vehicles and motorized equipment he acquired or had a lease-hold use, including two hay balers costing $141,000; a snowplow costing $109,000; a tractor costing $81,750; various promotion items costing $74,000; two pickups costing $53,000 and $49,000; a dump truck costing $49,000; a flatbed truck costing $42,000, and many other vehicles.

In addition, Clarke failed to report his receipt and use of other things of value including more than $146,000 in firearms; more than $134,000 in jewelry; more than $89,000 in artwork; more than $71,000 in construction expenses; payments to relatives totaling $62,000; payments to former Katun employees totaling $56,000; and more than $40,000 in vehicle-related expenses for a former family member.

Clarke was the former Chairman of the Board, Chief Executive Officer, and part-owner of  Katun Corporation, a privately-owned Bloomington based corporation that manufactures and sells parts and supplies for photocopiers and office equipment throughout the world.

The case is the result of an ongoing investigation by the Internal Revenue Service, Criminal Investigations and the Minnesota Department of Revenue.  Assistant United States Attorney Hank Shea and members of the Hennepin County Attorney’s Office are prosecuting different aspects of the case.