The saga of former Stillwater Lumberjack Days festival organizer David Eckberg’s financial problems continues. Eckberg, 63, is back in court, this time facing felony tax evasion charges in connection with the event.
Eckberg was charged March 17 in Washington County Court with three felony counts of failure to pay or collect taxes. If convicted, he could face up to five years in prison and a $10,000 fine on each count.
According to the criminal complaint, the Minnesota Department of Revenue says Eckberg owes the state more than $100,000 in sales and alcohol tax debt, related to the 2010 and 2011 festivals. Those amounts include tax penalties and interest, according to Eckberg’s lawyer, Tom Brever of Foster & Brever. Based on the complaint, Eckberg’s unpaid sales and alcohol tax was originally around $25,000.
Additionally, Eckberg is charged with failing to pay a 2 percent “non-resident entertainers tax” for the 2009 Festival, at which Creedence Clearwater Revisited and The Wallflowers played. According to the complaint, Creedence Clearwater Revisited’s contract was $55,000, and The Wallflowers’ contract was $50,000.
The non-resident entertainers tax is supposed to be withheld from payment made to out-of-state entertainers and turned over to the state. According to the complaint, Eckberg did not pay the state. The complaint says Eckberg admitted that he knew in 2008 of his obligation to pay the tax. The complaint also states that Eckberg paid the 2 percent tax on a $100,000 contract with the band Chicago in 2010. The state argues that this indicates he knew of his responsibility.
The complaint also alleges that Eckberg failed to pay the non-resident entertainers tax for festivals in 2006-2008, but those years fall outside the six-year statute of limitations. Including penalties and interest, the unpaid non-resident entertainer tax debt was $14,781 as of October 2010, the complaint says.
Eckberg is close to reaching an agreement with the state to pay an amount less than the total amount the complaint alleges he owes, his attorney Tom Brever said. Brever expects a final agreement prior to Eckberg’s initial court appearance May 7.
“I don’t have a final agreement yet, but I think we are very close to reaching a final agreement,” Brever said.
According to Brever, the tax problem “stems from the same underlying problem that was part of Dave’s earlier legal issues.”
“Quite honestly, Dave was a very poor record keeper,” Brever said.
But Brever also said the case against his client is highly technical.
State statute establishes a sales tax exemption for nonprofits in some cases, and Brever said that a Minneapolis-based law firm had advised Eckberg that Lumberjack Days admission and alcohol sales may not be taxable.
“I think Dave Eckberg’s contention has been that the exception applies and there were no taxes due,” Brever said. “The state has been quite adamant that the exception does not apply.”
According to the criminal complaint, in 2010 Lumberjack Days made more than $204,000 in sales subject to Minnesota sales tax and more than $119,000 in sales subject to alcohol taxes, which resulted in an estimated tax of $17,255 due no later than Feb. 5, 2011.
The complaint also states that in 2011, the festival made more than $102,000 in sales subject to Minnesota sales tax and more than $50,000 in sales subject to alcohol tax, for an estimated tax bill of $8,390, due no later than Feb. 5, 2012.
Lumberjack Days was canceled in 2012 in the face of financial woes. In February 2014, Eckberg pleaded guilty to one of 10 felony charges for writing more than $35,000-worth of dishonored checks. After paying restitution, Eckberg was sentenced to one year probation, a $1,000 fine and 240 hours of community service.
Brever hopes an agreement with the Minnesota Department of Revenue will put Eckberg’s Lumberjack Days problems behind him.
“I think David personally feels very badly about the whole episode and really is anxious to try to make peace and put this Lumberjack Days problem behind him and really bring closure,” Brever said.
Contact Jonathan Young at jonathan.young@ecm-inc.com