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Morris construction company owners sentenced to jail in tax evasion scheme

The owners of an embattled Morris, Minn.-based construction company involved in a controversial West Fargo project will serve 3½ years in prison for devising and executing a tax evasion scheme that bilked the government out of more than $500,000.

Brothers Joseph Edward Riley and John Thomas Riley own Riley Bros. Construction, a construction firm that has been contracted for many road and infrastructure projects in the Fargo-Moorhead area. In 2009, Riley Bros. was the contractor responsible for the problematic bridge replacement project on 32nd Avenue South in West Fargo.

West Fargo city leaders didn't like how the company handled the project but have since reluctantly agreed to continue working with Riley Bros., citing the legal criteria they're bound by when approving bids for city projects.

According to the U.S. attorney's office in Minneapolis: Joseph and John Riley were indicted in April 2009 for concocting a tax evasion scheme that involved concealing income they and many of their employees received through their construction business between 1984 and August 2003.

The conspiracy was intended to evade paying income taxes, Social Security taxes, Medicare taxes and unemployment taxes to the federal government. The indictment states the brothers also were attempting to defraud the state of Minnesota by evading state taxes and facilitating fraudulent claims for unemployment benefits.

Both brothers pleaded guilty in November 2009 to a charge of conspiracy to defraud the United States. They were sentenced on Thursday.

Each brother was also ordered to pay $250,000 in fines. The conspiracy amounted to about $500,000 of improperly reported income.