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Bayport man charged with 74 tax crimes in connection to vacation rental scam

He's accused of owing $194,961.43 in taxes and accused of stealing $17,960 from renters.

A Bayport man is accused of operating a business to rent out his properties as short-term rentals, failing to report the income to the state, and refusing to return the security deposits his renters paid. 

Karl Auleciems, 54, is charged with 74 tax-related felonies and is accused of owing $194,961.43 in unpaid tax, penalties, and interest, charges state, the Minnesota Department of Revenue says. 

According to the criminal complaint, Auleciems ran an unregistered business called KEASons Enterprises, which he used as a conduit to rent out his Lake Elmo property and other properties as short-term rentals. 

Charges say on "several occasions" between 2017-2020 Auleciems rented out the Lake Elmo property to people hosting special events with larges numbers of guests, such as weddings and family reunions.

He also rented out an apartment over the garage of the Lake Elmo property, a cabin in Danbury, Wisconsin, and a property in Stillwater, the complaint states. 

He'd advertise the properties on short-term websites like VRBO, Airbnb and FlipKey but then would conduct the transaction with the renter through his business. This allowed him to avoid the websites while still charging rental sales tax. 

Auleciems is accused of failing to file sales and use tax returns and pay sales tax for the rentals between April 2017 through May 2020.

He and his wife also filed fraudulent individual income tax returns and failed to pay income tax on his actual earned income from 2015-2019, charges say. They reported $237,398 in rental income those years when investigators found they actually made $633,629 off their rental properties those years. 

In addition to this, the criminal complaint details a 2018 civil lawsuit between Auleciems and the Town of West Lakeland. Several people who rented the Lake Elmo property testified during civil litigation that they found the Lake Elmo property on a third-party rental website and then Auleciems, who went by the name "Ethan" or "Larry," always had the renters deal directly with KEAsons. 

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The renters made payments to KEAsons and never via the third-party rental website. As part of their rental agreements, renters had to pay a security deposit. The agreement said the deposit would be refunded within 90 days of checkout, but he failed to return them without explanation or proof of damage, charges state. 

Charges say through this "deceitful scheme" he stole $17,960 from renters. 

Auleciems is charged with 34 counts of failing to file sales and use tax returns, 32 counts of failing to pay or collect and remit sales and use tax, five counts of filing false or fraudulent individual income tax returns and five felony counts of failing to pay individual income tax.

Each tax-related felony carries a maximum penalty of five years in prison and/or a $10,000 fine. 

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