A Twin Cities health care products entrepreneur and longtime tax protester has been sentenced to five years in prison for running up a bill of more than $600,000 in back taxes, interest and penalties.
The sentencing of Michael A. Schlegel, 56, of Corcoran, last week in federal court in Minneapolis follows his conviction by a jury on three counts of tax evasion, three counts of failing to file tax returns and conspiracy to defraud the federal government.
No restitution was ordered by Judge Patrick Schiltz as part of the sentence, but Schlegel remains liable to the IRS for all outstanding taxes, interest and penalties.
While in federal custody in the Sherburne County jail, Schlegel, co-founder of NatureRich Inc., made good on his promise and filed an appeal the day after his conviction.
NatureRich, Inc. operated as a multilevel marketing company that sold natural and health-related products. It paid commissions to salespeople based on their sales and the sales of others “downstream.”
Prosecutors said Schlegel failed to pay any of what he owed the government in 2000 and also failed to file 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 at the time of his conviction last year. “There is no law.”
His co-defendant, Bradley M. Collin, 53, of Brooklyn Center, pleaded guilty in December to defrauding the federal government and was sentenced to two years in prison.
By the time he was convicted, Schlegel no longer operated NatureRich but remained 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.
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.