Local Businessman Convicted For Tax Evasion
A federal jury recently convicted a former Twin Cities businessman of tax evasion, according to Minnesota’s U.S. Attorney’s Office.
Michael Schlegel controlled NatureRich, Inc., a Maple Grove-based “multi-level marketing company” that sold natural and health-related products, the U.S. Attorney’s Office said. Such companies are structured so that sales people are compensated for both the sales they generate and for the sales of people they recruit.
Prosecutors alleged that, between 2002 and 2009, Schlegel and his co-defendant, Bradley Mark Collin, received wages and commission payments from NatureRich that totaled more than $400,000. During that period, Schlegel also operated a painting business, from which he received more than $400,000 in income, Minnesota’s U.S. Attorney’s Office said.
In 2004, Schlegel and Collin began using multiple bank accounts to invest funds from multiple clients—a move often called “warehouse banking” that is designed to conceal the true source of funds, according to the U.S. Attorney’s Office. Meanwhile, Schlegel allegedly led NatureRich to pay his commissions to a trust called the “Andrew James Living Trust,” from which he paid his family’s expenses.
The men were also accused of filing misleading federal corporate tax returns for NatureRich “in an effort to conceal the true extent of their personal interest in and the income derived” from the company. Ultimately, they attempted to conceal at least $3 million in gross income from the Internal Revenue Service, the U.S. Attorney’s Office said.
Schlegel also failed to make payments toward the more than $600,000 in back taxes, interest, and penalties levied against him in 2000—and both defendants failed to file federal individual tax returns for tax years 2002-2009, the U.S. Attorney's Office said.
Schlegel was indicted last April and a federal jury found him guilty of multiple counts last week. Specifically he was convicted on one count of conspiracy to defraud the United States, three counts of tax evasion, and three counts of failure to file tax returns.
He faces up to five years in prison on the conspiracy count, five years on each tax evasion count, and one year on each count of failure to file a tax return, the U.S. Attorney’s Office said.
Meanwhile, court documents indicate that Collin pleaded guilty in December to one of the counts that he faced. Collin faces up to five years in prison, according to the U.S. Attorney’s Office.
U.S. District Judge Patrick Schiltz will determine both men’s sentences at a future hearing that has yet to be scheduled.