Leawood woman sentenced to 4 years in prison for using company as ‘personal piggy bank’

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LEAWOOD, Kan. —  A Leawood businesswoman has been sentenced to more than four years in prison for evading taxes while living a lavish lifestyle. U.S. Justice Department officials announced Wednesday that 58-year-old Kathleen Stegman used hundreds of thousands of dollars from her company, Midwest Medical Aesthetics, for her personal use. Prosecutors said Stegman used company money to buy condominiums in Las Vegas, real estate in North Carolina, a 54-foot yacht and $300,000 in gold coins.

In April Stegman was convicted of tax fraud following a month-long jury trial. The jury found Stegman guilty of four counts of tax evasion relating to her evasion of corporate income taxes for the years 2008 and 2009 and individual income taxes for the years 2007 and 2008.  Stegman and her husband, Christopher Smith, 51, were both acquitted on the charge of conspiracy to defraud the United States and Stegman was acquitted on one count of tax evasion.

According to the evidence at trial, Stegman under-reported her company’s gross receipts and overstated her company’s expenses on the corporate tax returns filed with the Internal Revenue Service (IRS).  Stegman also diverted income from the company for her personal use and failed to report the income on her tax returns.  The government also presented evidence that Stegman and Smith agreed to fabricate a repairs and maintenance contract between Smith and Midwest Medical in order to increase the company’s business deductions and divert money from the company to their personal use.  In December 2010, Stegman wrote a check in the amount of $50,575 to Encompass Construction, which was drawn on Midwest Medical’s bank account.  Smith used the money to buy gold coins that were shipped to Stegman’s business address in Leawood.  On Midwest Medical’s 2010 corporate tax return, Stegman fraudulently deducted this payment as a business expense for repairs and maintenance.

“(The) verdict is a reminder to business owners that they cannot use their companies as their personal piggy banks,” said Acting Assistant Attorney General Ciraolo after Stegman’s conviction in April.  “All taxpayers must file true and accurate returns with the IRS to report their income and expenses.  Those that fail to do so face significant consequences, including criminal prosecution, prison and monetary penalties.”