Minnesota Business Executive Sentenced To 5 Years In Prison On Charges Of Conspiracy, Tax Evasion, And Failure To File Tax Returns
United States Attorney Andrew M. Luger today announced the sentencing of MICHAEL ANDREW SCHLEGEL, 56, to 60 months in prison for conspiracy to defraud the United States, tax evasion, and failure to file tax returns. SCHLEGEL, who was convicted on March 13, 2014 following a seven-day trial, was sentenced on May 19, 2015 before Judge Patrick J. Schiltz in United States District Court in Minneapolis, Minn.
According to the evidence presented at trial and documents filed in court, from 2002 to 2009, SCHLEGEL controlled NatureRich, Inc., a multi-level marketing company that sold natural and health-related products. Like similar companies, NatureRich paid commissions to salespeople based on direct sales and on the sales of downstream salespeople. At various times between 2002 and 2009, SCHLEGEL and co-defendant Bradley Mark Collin received wages and commission payments from NatureRich that totaled more than $400,000. SCHLEGEL also caused NatureRich to pay his commissions to a nominee trust called the "Andrew James Living Trust," from which he then paid his family’s expenses. During that time, SCHLEGEL also operated a painting business, receiving more than $400,000 in income from painting contracts.
According to the evidence presented at trial and documents filed in court, in 2004, the defendants, through the use of nominee entities, began engaging the "warehouse" banking services of Olympic Business Systems and Century Business Concepts. Warehouse banking refers to the use of one or more bank accounts in which the funds of multiple clients are deposited and transacted, thereby concealing the true source of the funds and the individual truly responsible for the transactions.
According to the evidence presented at trial and documents filed in court, the defendants also filed misleading federal corporate tax returns in the name of NatureRich in an effort to conceal the true extent of their personal interest in and the income derived from NatureRich. In all, the defendants attempted to conceal at least $3 million in gross income from the IRS, thereby avoiding income taxes on that amount and also avoiding having those funds seized for payment of their previous tax debts.
According to the evidence presented at trial and documents filed in court, from 2002 through 2010, SCHLEGEL, and his co-defendant Bradley Mark Collin, conspired with each other and others to defraud the U.S. by obstructing the Internal Revenue Service ("IRS") in its lawful collection and assessment of individual income taxes. To that end, SCHLEGEL failed to make any payments toward the back taxes, interest and penalties levied against him in 2000, which totaled more than $600,000. SCHLEGEL failed to file federal individual tax returns for tax years 2002-2009, pursuing "tax protestor" ideologies.
On December 23, 2013, Bradley Mark Collin pleaded guilty to one count of conspiracy to defraud the United States. On November 4, 2014, Bradley Mark Collin was sentenced to federal prison for 24 months and 3 years supervised release by Federal District Court Judge Patrick J. Schiltz.
"These sentencings should send a clear message; schemes to evade the payment of taxes are a violation of the Federal Tax laws and the consequences of such schemes can and will result in significant jail time" stated IRS Criminal Investigation Special Agent in Charge Shea Jones of the St. Paul Field Office.
These cases are the result of an investigation by the IRS Criminal Investigation. They were prosecuted by Assistant U.S. Attorneys Tracy L. Perzel and John E. Kokkinen.
ANDREW SCHLEGEL, 56
• Conspiracy to Defraud the United States, 1 count
• Attempt to Evade or Defeat Tax, 3 counts
• Willful Failure to File Tax Returns, 3 counts
• 60 months in prison
• 3 years supervised release
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United States Attorney’s Office, District of Minnesota: (612) 664-5600