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A federal court jury late Friday returned mixed verdicts for two Utah businessmen accused of conspiring to evade taxes by creating a host of shell companies using straw owners and what prosecutors labeled a "spaghetti bowl" of brokerage and bank accounts to conceal $34 million in stock sales.

The jury returned a verdict Friday night of not guilty to the most serious charge of conspiracy to impede the workings of the IRS but found Lester H. Mower and Adrian A. Wilson guilty of three misdemeanor counts each of failure to file income-tax returns.

The end of the nearly two-month-long trial means the two face up to a year in prison on each of the three charges of failing to file returns.

The failure to convict the pair on the more serious conspiracy charge was a setback for federal prosecutors who expended considerable effort and expense in trying the case over the past two months after a plea bargain fell apart.

"We are pleased the jury found the defendants guilty on all three of the tax counts," said Melodie Rydalch, spokeswoman for the U.S. Attorney's Office. "We are, however, disappointed with the verdict on the conspiracy count given the evidence which was presented."

Marcus Mumford, attorney for Mower, said the IRS and U.S. Attorney's Office pursued "vague conspiracy allegations" when investigators didn't find evidence of wrongdoing.

"It's tragic how many millions of taxpayer funds were wasted on this misbegotten case," Mumford said. "This case is indicative of the need for fundamental reform in the relationship between our government and its citizens."

In closing arguments on Thursday, Assistant U.S. Attorney Mark Hirata had argued that Mower, Wilson and a third man, attorney Nathan Drage, had created a "spaghetti bowl" of financial accounts to hide proceeds of $34 million of stock sales in various companies they created.

But attorney Bret Rawson, who represented Wilson, said while the reverse-merger industry that the three worked in is seen as "bottom of the barrel," the businesses created by the three operated legally.

"They were not some kind of illegal tax shelter," Rawson said of the businesses. "There was nothing unlawful about them."

A reverse merger takes place when a privately held company with operations combines with a company that has no operations but whose shares are publicly traded. It's considered a relatively quick and easy method of turning a privately held company into one that can sell shares to the public.

Mumford said the two businessmen were in a closely regulated industry and that prosecutors were attempting to claim they engaged in a conspiracy when they were merely trying to comply with laws and regulations.

"That's one of the ugliest accusations you can throw at someone," Mumford told the jury.

Drage was convicted in a separate trial in March of conspiracy and three counts of failure to file corporate-tax returns.

Mower and Wilson had faced up to five years in prison and a $250,000 fine on the conspiracy charge but now could be sentenced by U.S. District Judge David Sam to up to a year and a $100,000 fine for each count of failure to file corporate returns.

Sam set sentencing for Sept. 2. Sentencing for Drage is now scheduled for Sept. 14.

Hirata summed up the government's case that the businesses were organized and that monies from the companies were mingled with other funds in such a way that it would be impossible for the IRS to trace them to a single stock transaction and impossible then to determine tax liability.

The operation "reflects an unmistakable agreement to hide and conceal from the IRS," he said.

But Rawson countered that the government never determined whether taxes were even owed on the stock sales.

"They know that the earnings are over $20 million and they can't tell you if these men even owe taxes," he said.