John Menard...Potential trouble

[Amanda B.'s Mom]

The below link is for a local news story which indicated that John Menard may owe over 100 Million in back taxes. This is primarily due to individual investments John Menard made in the racing team. Quotes from the article below, link below that.

"For example, Menard received $20.6 million from the company in 1998 while the next-highest-paid employee, senior merchandise manager Ed Archibald, got $467,760. Menard’s pay was a base of $157,500 plus 5 percent of income before taxes, according to filings in the case.

The largest issue in dispute is how to tax the millions in cash paid by Menards to Menard and to Team Menards. Menard incorporated Team Menard, a race car business, in 1992. The race cars and drivers were used to promote Menards stores.

That is just what the IRS claims the company did by improperly deducting much of the money paid to support the race team and its activities. Instead, the IRS says the money should be accounted for as a dividend paid to Menard personally, who then invested it in the racing team."

http://www.leadertelegram.com/story.asp?id=46536

Hmmmmmmm

[RTKar]

Maybe he can get directions to his next home and a few life enhancing pointers from Larry Curry....

[chop456]

Methanolandbrats coined Menard's best nickname:

"The crooked lumber man".

Anyone who's ever tried to find a straight 2"x"4" in one of his stores knows all about it.

I hope he doesn't end up in the joint. Where would he get those awesome haircuts? :cry:

[chop456]

$100 million at stake in Menards tax battle
Home improvement chain, owner audited over race team payments
By AVRUM D. LANK
alank@journalsentinel.com
Posted: Sept. 11, 2004
Uncle Sam wants big money from Menards.

Menard Inc.

Brief History

John R. Menard started Menard Inc. in 1962 and has turned it into the third-largest retail home improvement chain in the country.
It has more than 22,000 employees at stores in 10 Midwestern states.
Last year, its sales were estimated at $5.6 billion at 170 outlests. That made it the nation's 43rd largest retailer.
Menards' advertising slogan urges customers to "save big money."

Advertisement

In a series of audits going back to 1998, the Internal Revenue Service claims that Eau Claire billionaire John R. Menard and his home improvement company owe about $78 million in back taxes and penalties. With accumulated interest, the sum easily could come to $100 million, according to one Milwaukee tax attorney.

The IRS is auditing Menard even though he and his company have been paying millions of dollars to the government at the highest rates and do not appear to use sophisticated tax shelters.

Papers filed in the case offer a glimpse into the workings of Menard Inc. and 64-year-old John Menard, who is one of the richest people in Wisconsin. Although the Eau Claire-based concern has billions in annual sales, it is one of the most secretive of Wisconsin's private firms. Spokeswoman Dawn Sands declined to comment for this story.

According to the picture painted by the case files, Menard is a driven executive who works long hours, pays great attention to detail and receives millions more than other employees of his corporation. For example, John Menard received $20.6 million from the company in 1998 while the next-highest-paid employee, senior merchandise manager Ed Archibald, got $467,760. John Menard's pay was a base of $157,500 plus 5% of income before taxes, according to filings in the case.

The largest issue in dispute is how to tax the millions in cash paid by Menard Inc. to Menard and to Team Menard Inc. Menard incorporated Team Menard, a race car business, in 1992. The race cars and drivers were used to promote Menards stores.

Stores started in 1962
Menard started Menard Inc. in 1962 and built it into the third-largest retail home improvement chain in the country. It has more than 22,000 employees at stores in 10 Midwestern states. Last year, its sales were $5.6 billion at 170 outlets, according to an estimate from Stores magazine. That made it the nation's 43rd-largest retailer, just behind Barnes & Noble, the magazine said. Menards' advertising slogan urges customers to "save big money" at Menards.

That is just what the IRS claims the company did by improperly deducting much of the money paid to support the race team and its activities. Instead, the IRS claims the money should be accounted for as a dividend paid to Menard personally, who then invested it in the racing team.

It also argues that most of the money Menard was paid by Menard Inc. was not salary but a dividend.

While salaries and advertising expenses can be deducted as a corporate expense, dividends cannot. Although Menard paid taxes on the money he received from the company, the IRS claims the company should have also. In addition, the IRS claims Menard should pay taxes on most of the money that went from the company to support Team Menard. Tax returns from 1998 to 2001 are at issue, although a Tax Court trial last year covered only those returns from Menard in 1998 and the company in its fiscal 1998, which ended Jan. 31, 1998.

The other years being audited cover most of the same issues, and lawyers said that the outcome of the trial should set a precedent for how they are settled. No decision has yet been issued.

Defense 'very comfortable'
Menard's lead attorney, Robert E. Dallman of the Milwaukee firm of Reinhart Boerner van Deuren, argues that the racing costs were legitimate promotional expenses and that the company paid John Menard what he was worth.

"I feel very comfortable with our chances of prevailing," he said.

Asked to comment on the claims, Donna Migazzi, IRS spokeswoman in Milwaukee, said, "There are certain standards that the tax law sets, and it is up to the courts to decide whether the IRS applied those standards correctly in this situation."

"They are picking on Menard because he is an easy target," said Rick Taylor, a CPA with Clifton Gunderson in Milwaukee who also works on tax matters for owners of private businesses. "I can give you as many cases where the IRS says you do not pay the guy enough." In such a case, the IRS often tries to tax what it terms "excess profits" left within a firm.

As to the expenses for Team Menard, the underlying question is whether the company received benefit from the relationship, Taylor said.

In testimony at the trial, John Menard said that the arrangement between the two companies that he owned was covered by an oral agreement he made with himself when the racing team was incorporated.

That might not be enough.

"You're never going to convince me that what was done in this case was subject to generally accepted accounting standards," Tax Court Judge L. Paige Marvel told Dallman during the trial.

Team Menard does not now race any cars, although Menard Inc. sponsors entries by another racing team.

No matter the outcome, it is clear from the case records that Menard and his company pay a lot in taxes.

$15.8 million in 2000 taxes
In 2000, John Menard paid about $15.8 million in taxes on about $39.9 million in income, or about 40%, according to Craig Zetley, a Milwaukee tax attorney not involved with the case who reviewed the filings.

In fiscal 2000, Menard Inc. paid about $127.2 million in taxes on about $363.5 million in income, or about 35%. The IRS wants to increase John Menard's taxes for that year by $9 million and those of his firm by $26 million, plus add penalties of about $4 million, Zetley estimates.

"Both the corporation and the individual are paying a good percentage of tax," Zetley said. "This is not an individual who seems to be taking aggressive tax losses."

Zetley also estimates that, with interest, Menard could be liable for more than $100 million if he loses on all points for all the years being audited.

Although a person can choose to pay disputed taxes and claim a refund with interest if he is later successful in court, Dallman said that was not done in this case. Instead, he said that Menard has set aside enough money to pay any judgment should he lose.

That strategy makes sense to Zetley. Menard probably can make more by investing the money in his company than by giving it to the IRS and trying to reclaim it later, Zetley said.

In testimony at the trial, Menard made it clear that he pays close attention to the money he invests in the company, overseeing every aspect of his organization.

"I tend to be a micromanager," he said. "That's one of my faults."

In addition to its stores, the company manufactures some of the products it sells and develops the real estate around many of its outlets.

"I enjoy everything," Menard said. "I enjoy being a retailer. I love stores. I love the interaction with customers, the people. I enjoy the manufacturing aspects of our business.

"It's just fascinating to me that you can take a bare chunk of land and divide it up and put our store in one corner of it, and all of a sudden that land is worth 10 times what it was before when it was a farm field," Menard said. "I can't believe it's that easy to make money."


Couldn't happen to a nicer guy. Some of the stories I've heard about working for/competing with this man would curl your hair. Bon voyage, loser! :gomer:

[cart7]

Considering his results in pre-split Cart, his 500 efforts over the years including the millions he dumped into trying to make the old Buick V6 work plus the waste of money he's spent on a worthless earl team I can't blame the IRS for going after the guy. He deserves it.

Not to mention, if I ever was going to buy a house in Menards country and found out the previous owners had done some home remodeling with materials from Menards, I'd immediately assume that none of the walls would be plumb nor the corners square. ;)

[Jervis Tetch 1]

Back in 2000, a good friend of mine was offered the PR job for Menard's racing team after former PR guy Laz Denes left.

My friend told me that in addition to the team, John Menard wanted him to do the PR work for his son (Larry) and nephew, plus oversee the media for a couple of dirt tracks he owned in Wisconsin.

Finally, Menard wanted him to also do the PR for the Menards Company, which would require a move to Eau Claire, Wis. from his home in Indianapolis.

All this for the grand some of $40K. My friend thought the job would and should have been for at least $80K considering the Menards Company and was willing to even do it for $50K, but Mr. Menard wouldn't go a penny over $40.

He thanked Menard, but declined the offer to stay with his CART team. Afterwards, my friend quipped to me there's a reason Menard is a billionaire...he doesn't pay much to employees.

Still, although I hate the I*L, I do hope Menard gets out of this okay.

[theunions]

Forbes magazine ran a well-publicized feature article along the same lines about a year ago...not sure if it's still online.

[theunions]

Found it...published Oct, 6, 2003:

The Do-it-Yourself Billionaire (http://www.forbes.com/forbes/2003/1006/048.html)

[theunions]

My friend told me that in addition to the team, John Menard wanted him to do the PR work for his son (Larry)...

Do you actually mean Paul instead of Larry?

[nrc]

"Team Menard does not now race any cars, although Menard Inc. sponsors entries by another racing team."

I was not aware of that.

[pchall]

In my few years in Wisconsin I never shopped at Menard's. One of the first things that happened when I got up there was Menard bulldozing the local dirt short track for the parking lot of a new store at what was supposed to be a prime intersection.

[RichK]

...Menard bulldozing the local dirt short track for the parking lot of a new store at what was supposed to be a prime intersection.

Oh the irony!
:cry: :laugh: :laugh:

[chop456]

In my few years in Wisconsin I never shopped at Menard's. One of the first things that happened when I got up there was Menard bulldozing the local dirt short track for the parking lot of a new store at what was supposed to be a prime intersection.

Last Updated: Sept. 20, 2001
Racing Beat



Dave Kallmann
E-MAIL | ARCHIVE


Another season of Saturday night racing at Hales Corners Speedway concluded last weekend the same way that it began: shrouded in uncertainty.

Was this the last year at the Milwaukee area's venerable dirt track? Will there be one more? Two? Ten?

Such questions without definitive answers are the sorts of things that could have caused distress and frustration as the year wore on. Or not.

"I've been going to the racetrack since the '60s to watch as a kid, and I really didn't know what was going on," said Dave Gorny, the recently crowned sportsman division champion.


"They had sprint cars and modifieds, and then they went to late models. Then in the '70s, after I graduated, a friend bought a sportsman car, and I went with him. That's when we first heard rumors about the racetrack being sold and closing.

"We've been living with the rumors for 30 years, and it's still there."

But this time the rumors were well founded in fact. Track owner John Kaishian had an agreement in principle with Menards for the Eau Claire home-improvement chain to lease the property for its fifth metro location.

When the season began, it seemed that only a few municipal approvals were needed and that those were likely to be granted. The area is growing, with car dealerships and other large retailers, so a Menards store would blend in with ease.

But the move has lost steam, and Jim Wehner, the track's general manager, isn't sure exactly why. Rumors had circulated that the plans had changed from a store to a distribution center, which was unacceptable, but those are erroneous, Wehner said. A Menards publicist did not return a call seeking comment.

So the future of the racetrack remains up in the air.

"There's no progress on the development of the site," Wehner said. "We're anticipating another season and maybe more after that. I'm 90% sure we'll be racing again."

If a decision were made to close the track between now and its traditional late April opening date, most of the competitors - who come predominantly from Milwaukee, Waukesha and Racine counties - probably would simply commit to driving farther to continue racing.

Other tracks already have approached competitors from the sportsman division about absorbing their class. The same could happen for the late models, while those who campaign modifieds and Hales Whales street stocks could find other places to compete.

"I'm pretty sure they would," said Russ Scheffler, who won his ninth late model championship at the track this year. "It's such an investment they have, and resale on race cars isn't very good. Who do you sell your stuff to when the local track closes down?"

These are people who race for the love of the sport. If they have to go to Beaver Dam or Plymouth or somewhere in northern Illinois, they'll adapt.

They always have.

[chop456]

Hales Corners Speedway pulls over for its final pit stop
As track closes, roar of engines will die, memories live on
By DAVE KALLMANN
dkallmann@journalsentinel.com
Last Updated: Aug. 26, 2003
Pat Heaney was one of those kids who grew up hooked on Hales Corners Speedway.

Auto Racing


Photo/Hales Corners Speedway
Much has changed at Hales Corners Speedway since Frank Smith (right) won seven consecutive sportsman titles from 1965-'71.



Photo/Hales Corners Speedway
Soon, Hales Corners Speedway - like these cars from a race in 1959 - will vanish from the landscape along S. Highway 100 in Franklin as racing pulls over for progress.



He was 2 in 1958, when his father took him to watch men nicknamed Fuzzy and The Mouse slide their home-built modifieds through the muddy, rutty turns two- and three-abreast.

"Mom said I was kind of a mental case after that," Heaney recalled. "I took anything with wheels and raced it. I even raced marbles, she said."

He cut out paper cars, colored them to look like those of his Hales heroes and pushed them around a track fashioned from a piece of plywood. Later it was slot cars. And finally, in 1982, Heaney pulled his own, real sportsman into the pits and unloaded it for competition.

Heaney was not alone in his addiction, not by any means.

Four generations of fans have passed through the gates. They watched Miles "The Mouse" Melius battle Etchie Biertzer and Fuzzy Fassbender in the modifieds of the '50s, Frank Smith tear up the sportsman competition for seven consecutive titles from 1965-'71, and Al Schill take on Whitey Harris and Mike Melius, The Mouse's cousin, as the late-models emerged in the '70s and '80s.

They hooted as Mel Kenyon wheeled by in his midget and cheered as the King of the Outlaws, Steve Kinser, manhandled a screaming sprint car. They saw Alan Kulwicki get his start. They knew Tony Stewart first.

Friendships were made. Marriages were proposed . . . and broken.

And some of those fans, like Heaney and reigning late-model champ Russ Scheffler, crossed over to join roughly 2,500 drivers who've taken part in a Saturday night tradition that has lasted more than a half-century, though no one can pinpoint exactly when it all started.

"I'm 39, so 30 years I've been going there," Scheffler said Tuesday. "I don't know what I'm going to do next year."

The 11-time champion just knows it won't involve racing at Hales Corners Speedway. Menards is moving in to the land along S. Highway 100 next year, an inevitable step in the growth of Franklin that became official two weeks ago.

But, Mother Nature willing, the crusty old track will go out Saturday night with a party like few it has seen.

Thousands of old friends plan to gather, including many of the track's legends, to watch racing for one last time, to sip a beer in the shade of the giant oak in the parking lot, to tell stories and, in many cases, shed a tear.

The Racing Roundup radio show, usually heard on Monday nights, plans a live broadcast honoring the track's history on WAUK-AM (1510), beginning at 4:30 p.m.

"I'd rather not see it go, that's for sure," said Smith, who continues to compete well into his 60s. "But everything has to change. Times change."

Oh, how have they.

As tracks sprung up around the area in the '40s, The Mouse got into racing because he had young mouths to feed that his $45-a-week salary barely covered. In every single season until he quit 36 years ago, he won more than he spent.

"I ran there the first race they ran, and boy did they have a big payout," said Melius, 79. "I cleaned house, and I got $27.50."

Harris spent about $1,500 on the modified he put together in 1963, and that included the engine and trailer.

"The first time I drove, I finished fourth in the feature . . . made $140 and didn't break anything," said Harris, who ranks second to Scheffler on the all-time late-model feature victory list with 58. "So that particular night, I had a hundred-dollar profit."

But after the 1996 season, Harris hung up his helmet. The impending change from steel engines to aluminum made the cost to continue prohibitive, and he was 60, so the timing seemed right.

Costs rise, interest wanes
Purses have gone up 40-fold in Hales' lifetime, but costs have risen more. A strong engine to power a late model goes for $30,000, and even the best sponsorships don't make up the difference.

Competitors write off the expense of their racing the way they would any other hobby, they say. That's the only way it makes sense.

"The work and the cost of the cars is just too much," said Smith, a low-buck racer for four decades who won his last title in a late model in 1975. "Years ago, people, you had to chase them away. Nowadays you can't get anybody to work for free. You can't blame them, I guess."

The expense takes the brunt of the blame for declining car counts, along with the anticipation that preceded the decision to close.

In the 1960s heyday of the modifieds and sportsman cars - when the drivers raced a circuit of Hales, Slinger, Cedarburg and the State Fair Park quarter-mile - fields of more than 40 modifieds and 120 sportsmen would show up at the track.

Now, the total number of competitors for a regular weekly show tallies closer to 100 for all five divisions.

"I started racing there in '82, and they were already talking about shutting down," Heaney said. "You'd spend your whole off-season rebuilding your race car, send your motor out for rebuilding - that's pretty costly - and you wondered if it made any sense."

Fan turnout has fallen off as well, and the fans who do come complain that the amenities don't stack up to other tracks they visit.

So what's next?
But now the question arises: What are they going to do when Hales is gone?

There has been talk that other tracks could absorb entire divisions from Hales. At least four dirt tracks sit within about 90 minutes of Milwaukee: Wilmot Speedway in Kenosha County, the Sheboygan County Fairgrounds in Plymouth and two in Beaver Dam.

"There's a big investment in your equipment, and you can't just get rid of it overnight," Scheffler said. "You might as well run it somewhere."

The possibility remains, as well, that Hales Corners Speedway could be reopen elsewhere.

John Kaishian, who has owned Hales Corners Speedway for 50 years, has a promise from Franklin that the city would work with him on a new location, said Jim Wehner, his general manager. Kaishian, 69, has yet to announce any definitive plans beyond the sale.

"Guys could get together and build a nice, state-of-the-art facility," Scheffler suggested.

"If someone could build a nice track and have a little go-kart track there for the kids and have some more entertainment, more things for fans to do, I think it would be a better deal."

Someday, perhaps.

A few people would like to bid farewell to an old friend, first.

[Amanda B.'s Mom]

menards has long had a reputation for having lumber that is vedry warped, had bark on it, etc. I can remember many huours spent sifting through piles of boards looking for ones that were usable. I remembered this when I recently purchased some #3 grade lumber for a horse fence. When i saw the lumber, it was much better than the #1 grade lumber at Menards. I felt a little guilty using it for a hiorse fence. Yet, the price, delivered, was much better than having Menards deliver #3 grade lumber.

I do wonder what the recent developments will mean for the Infinity series. Menards was also recently cited for dumping toxic waste into a drain that empties into a local waterway.

Some people here think that "everyone" is "picking" on John Menard. I know better.......

[theunions]

"Team Menard does not now race any cars, although Menard Inc. sponsors entries by another racing team."

I was not aware of that.

Yup, John merged his operations with Panther in the off-season.

[Jervis Tetch 1]

Do you actually mean Paul instead of Larry?Yes, sorry my bad.

[Sean O'Gorman]

Yup, John merged his operations with Panther in the off-season.

It appears they merged their mediocrity with Panther as well.

[JohnHKart]

This tax thing doesn't surprise me. This reminds me of when Tony Stewart left Team Menard he had some caustic comments about John violating some kind of zoning laws or environmental laws on his property, or something similar to this. The effect of the comment was like Tony was saying Menard was a crook.

John

[Amanda B.'s Mom]

The judges decision is in.......

Yes, menards has been violating environmental discharge laws since 1998. has been "caught" several times, but the fines seem to not prevent it from happening again and again. :shakehead

9/18/2004 12:56:07 PM
Judge: Menard must pay millions more in taxes

Special to the Leader-Telegram

WASHINGTON — A U.S. Tax Court ruling could cost Menards and its founder millions of dollars in additional 1998 taxes.

Judge L. Paige Marvel’s opinion issued Thursday directed the two sides to determine the exact amount owed based on her 102-page decision.

She ruled John Menard should have been paid $7.06 million rather than $20.64 million he was paid or the $1.38 million the IRS allowed. Menard is the company president who owns 89 percent of the firm’s stock.

“It was very much a middle-ground decision,” Dawn Sands, spokeswoman for the Eau Claire-based company, said Friday. “We won in part; we lost in part. We certainly will pay whatever is the appropriate amount based on the decision and move on.”

Besides determining the compensation package paid to Menard was excessive, the opinion said $1.62 million of the $7.72 million spent on Team Menard racing was excessive and a taxable dividend to John R. Menard.

“We felt we were right from the beginning and we still feel we were right, but obviously the judge has the final say in the matter and reached a decision somewhere in the middle,” Sands said.

She said a team of company accountants would examine the opinion to determine the amount of taxes so the case that has been pending in the court since 2002 can be closed.

“We never shirked from paying our taxes and we don’t intend to now,” Sands said.

The opinion covers cases involving the company and Menard personally, which were consolidated for trial.

Once the amount of taxes and penalties for failing to file accurate tax returns are computed, Marvel will sign a decision after which Menard would have 90 days to request a U.S. Court of Appeals review. Sands indicated the firm would not appeal.

IRS spokesman Anthony Burke said the agency doesn’t comment on cases.

During a trial before Marvel, the company and Menard had argued that the two-car race team founded in 1992 to compete in the annual Indianapolis 500 race brought national media exposure to the company as well as “other advertising benefits.”

“Menard’s payment of the excess (Team Menard) expenses resulted in a constructive (non-cash) dividend from Menards to Mr. Menard,” the opinion said.

“As TMI’s president and sole shareholder, Mr. Menard exercised indirect control over the payments.”

Marvel also said she found it “significant” that Menard agreed to reimburse the company for any part of a 5 percent bonus denied as an expense deduction to the firm.

“Such reimbursement clauses suggest that the taxpayer had pre-existing knowledge that the compensation may not satisfy (tax regulations) … and lead to the inference that the compensation was intended, in part, as a disguised dividend.”

The opinion conceded that while Menard’s “hard work contributed greatly to Menard’s success,” it disagreed that the bonus arrangement was part of his deductible pay.

“When large shareholders base their compensation on a percentage of the company’s income, the arrangement may suggest an attempt to distribute profits without declaring a dividend,” Marvel wrote.

Menards has 9,200 employees and 180 stores in 10 states selling home improvement products.

Moskal is a writer based in Virginia.