A Twin Cities health care products entrepreneur and longtime tax protester has been convicted of tax evasion.
Michael A. Schlegel, 55, of Corcoran, cofounder of Nature Rich Inc., was found guilty in federal court in Minneapolis of three counts of tax evasion and three counts of failing to file tax returns.
Prosecutors said Schlegel failed to make any payments toward more than $600,000 in back taxes, interest and penalties levied against him in 2000.
He also failed to file federal individual tax returns for tax years 2002-09, pursuing what the U.S. attorney's office in Minnesota characterized as "tax protester" ideologies.
"There is nothing that requires me to file an income tax return," Schlegel said Thursday. "There is no law."
Schlegel said he intends to appeal because "my attorney never allowed me to testify. If I had testified, we would've won. … I'm going to fight this to the end."
His co-defendant, Bradley M. Collin, 53, of Brooklyn Center, pleaded guilty in December to defrauding the federal government.
From 2002 to 2009, Schlegel operated NatureRich Inc., which sells natural and health-related products. Schlegel no longer operates NatureRich but remains a distributor.
A 2007 article in the Star Tribune said the multimillion-dollar Maple Grove-based nutritional supplement company made natural, toxin-free soaps, deodorants, nutritional shakes and other products.
NatureRich paid commissions to salespeople based on their direct sales and on the sales of salespeople "downstream" in the multilevel business model.
Together, Schlegel and Collin collected wages and commission payments exceeding $400,000 in those years, prosecutors said. Schlegel also had NatureRich pay his commissions to the "Andrew James Living Trust," from which he paid his family's expenses. During that time, Schlegel ran a painting business that earned more than $400,000.
By using various bank accounts to conceal income and filing misleading federal corporate tax returns, the defendants attempted to conceal at least $3 million in gross income from the IRS, prosecutors said.
Schlegel faces a potential maximum penalty of 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. Collin faces a potential maximum penalty of five years. Sentencings have yet to be scheduled.
"They wanted to make an example of a high-profile person," Schlegel said Thursday. He said he's even had to sue U.S. Attorney Eric Holder, alleging that his civil rights were violated by what his suit describes as "the conspiracy [by] federal employees bending and twisting the law in order to secure convictions in federal cases."