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March 20, 2005

tomdee.jpgThomas Mower and his ex-wife, Leslie "Dee" Mower, were convicted Friday by a federal jury on tax evasion and conspiracy charges. The Mowers are founders of Neways, an international multi-level marketing company based in Utah.

Mr. Mower was also convicted of "corruptly impeding the due administration of the internal revenue laws." Neways former attorney, James Thompson, was also convicted in the case.

From the Department of Justice press release:

The defendants devised and executed a scheme to conceal from the IRS more than $1 million of Neways, Inc.’s gross receipts received from Neways Australia, as well as more than $3 million of commission income the Mowers received from distributorships in the multi-level marketing structure of their United States, Australian and Malaysian companies. In furtherance of the scheme, Mr. Thompson created and presented a false and fraudulent loan document and made false and fraudulent statements to an IRS Special Agent to hide the Mowers’ commission income.

Sentencing is set for June 21. The tax evasion and conspiracy charges could fetch up to five years in prison and $250,000 in fines; the charge for impeding the IRS could add three years and $250,000 to the penalties. These fines are in addition to the civil fraud penalties that are likely to be imposed.

We can draw several lessons from the case, no less important for being obvious:

-Don't commit tax fraud.
-Don't make it worse by forging or altering documents.
-Don't use an MLM arrangement as your tax planning - at any level!

Looking at the dollars involved, there clearly is money in MLM arrangements - at the top, anyway.

UPDATE 9/20/2005: The Utah U.S. district court last week set a sentencing date of January 4, 2006.

UPDATE 1/10/2006: Court documents indicate that sentencing will not take place before March 4, 2006.

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