United States v. Vernon

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Defendant Mary Vernon was a physician licensed to practice in the State of Kansas. She co-authored a book with the late Dr. Robert Atkins, famous for a low-carbohydrate diet. Vernon also worked as the medical director for several nursing home facilities in the northeast Kansas area, and also provided consulting services to various entities, including the University of Kansas. In April 1999, the Internal Revenue Service (IRS) assigned Revenue Officer Joni Broadbent to collect from Vernon unpaid taxes for the 1997 tax year. Broadbent was subsequently assigned by the IRS to collect from Vernon unpaid taxes for the tax years 1991 through 1996. Although Vernon filed a tax return for 1997, she did not file a tax return for the years 1991 through 1996. Together, the unpaid taxes, penalties and interest for the tax years 1991 through 1997 totaled $1,432,299.38. After processing late returns, the IRS adjusted the amount owed by Vernon downwards to approximately $1.1 million. Vernon did not comply with deadlines set by the IRS for payment. As a result, Broadbent levied various investment and retirement accounts that Vernon held, and eventually seized Vernon's personal residence. At the time the IRS moved to seize Vernon's personal residence, the amount of unpaid taxes was approximately $543,015.11. The federal tax lien was eventually released so that Vernon could sell the residence without encumbrance. Vernon, unbeknownst to Broadbent and the IRS, arranged for her domestic partner, Sara Wentz, to purchase the residence for a price of $250,000. The proceeds from the sale went to the IRS, but still did not satisfy Vernon’s tax liability in full. Vernon set up a new company, through which she could continue her work as a consultant, Rockledge Medical Services. Wentz was Rockledge's sole shareholder, and Vernon worked as a volunteer, thus receiving no income for her work. Vernon and Wentz disregarded corporate formalities in dealing with Rockledge’s contracts and finances. At some point, the IRS began investigating Vernon from a criminal standpoint. And that investigation ultimately led to the indictment for tax evasion that was issued in this case. Vernon was sentenced to a total term of imprisonment of 41 months, to be followed by a three-year term of supervised release, and ordered to pay $311,157 in restitution to the Internal Revenue Service. Vernon appealed her convictions and sentences. Finding no reversible error, the Tenth Circuit affirmed. View "United States v. Vernon" on Justia Law