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Atkins Diet Doctor Going to Prison for Tax Evasion: 10th Cir.

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By Jonathan R. Tung, Esq. on February 12, 2016 1:53 PM

Remember the Atkins diet? One of the low carb diet's most outspoken and enterprising exponents was Dr. Mary C. Vernon of Kansas -- and now she's headed to prison. The Tenth Circuit just upheld her criminal conviction for tax evasion and greenlit the penalty of $311,000.

Now Vernon is headed to prison for three years and five months. It's a fate worse than carbs.

Low Carb Background

Dr. Mary Vernon became part of the Atkin's diet scene in the 2000s after she co-authored a book with Robert Atkins himself. When she was eventually charged with tax evasion, prosecutors presented evidence that Vernon earned about $750,000 between 2003 and 2008 from her work time with Atkins Nutritional Services. In fact, Doc Vernon had been actually in default of her taxes for the majority of the 90s and several attempts were made to collect.

Instead of paying her taxes, she hired an attorney to create a phony corporation in order to hide her assets. The company was created under the pretense of protecting her wealth from the liability associated with her medical activities with Atkins, as well as consulting work she did on the side.

Shell ("Sham") Corporation

Under her direction, she created her sham company and arranged for her domestic partner to purchase her own residence in order to keep it within her control and power. Her domestic partner unwittingly became her pawn. When attempts were made to take her house in order satisfy her debts, the house had already become the property of the corporation, thus frustrating that attempt.

It all began unravel, however, when the couple applied for a loan at University National Bank. Either because she was foolish or because she was desperate, Vernon supplied the lender with copies of her tax returns. The problem was that there were discrepancies between Vernon's provided copies and the copies the bank got from the IRS.

Jury Hands Down its Verdict

Vernon was convicted of five counts of attempted tax evasion, with all counts ranging from a number of different years. The Tenth Circuit did not show her any mercy either. It found that her legal basis for creating an S Corporation were pretty much baseless too. She used the business entity as an "alter-ego" for her own personal goals and interests, an ethical no-no under most standard professional rules and practice.

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