Nobody told Dorothy Jones that her divorce from former Triad Industries owner Rick Jones exposed them to more than $1 million in Internal Revenue Service penalties.

She testified at a June 16 hearing that she received a letter about potential IRS liability after she and Rick signed a marital settlement agreement.

The letter derailed the agreement and necessitated a hearing before Madison County Associate Judge Duane Bailey, who dissolved the marriage on April 16.

At the end of the hearing Bailey directed their divorce attorneys to talk to Rick's criminal attorney, "to find out what if any understanding there is with the IRS."

Bailey said, "Mrs. Jones doesn't know a thing about it so I think you should at least provide that option, that she knows this information."

Rick pleaded guilty in January to income tax evasion charges.

He admitted that BP Amoco Products paid Triad Industries for soil cleanup at its refinery and that he spent much of the money for his personal benefit.

He agreed to pay $2.4 million to IRS and $1.2 million restitution to BP Amoco.

U.S. District Judge Phil Gilbert set sentencing but delayed it while Rick cooperated with federal prosecutors.

To meet his obligations Rick needed to resolve divorce proceedings he started in 2007, before his crime caught up with him.

Bailey set a divorce trial but called it off when Rick and Dorothy settled.

Bailey's April 16 judgment of dissolution allowed 15 days for financial transactions so Rick could pay IRS and BP prior to sentencing on May 7.

The transactions didn't happen and although Gilbert again delayed sentencing, Rick moved to vacate the dissolution judgment.

His lawyer, David Fahrenkamp, asked Dorothy at the June 16 hearing if there was potential tax liability resulting from audits for 2001 through 2005, and she said yes.

Fahrenkamp asked if a revenue agent tendered a settlement amount that represented a discount of more than $1 million.

Dorothy said, "I knew there was a discount but I didn't know the amount."

Fahrenkamp asked if she discussed with anyone the fact that she might have a tax liability upwards of $4 million.

Dorothy said, "We discussed that there might be a liability but never an amount."

Fahrenkamp asked if civil penalties, criminal penalties and BP restitution had to be paid before Rick's sentencing.

For Dorothy, Wendy McIntyre objected and said, "We don't know what is happening with him and his criminal case."

Fahrenkamp finished and McIntyre asked Dorothy if the agreement said she was going to do everything.

Fahrenkamp objected and Bailey asked, "Who was supposed to do this work?"

Dorothy said, "It said each party but I initiated doing the bank accounts."

McIntyre asked if she had an understanding with respect to Rick's sentencing date.

Dorothy said, "The sentence date was changed, I believe to May 28."

Bailey asked how she knew this and Dorothy said, "It was on the Record."

Bailey said, "Infamous Madison County Record?"

Dorothy said, "That may have been the first place we saw it."

McIntyre asked if she had any reason to delay paying BP or IRS, and Dorothy said no.

McIntyre asked if she received information that IRS was seeking additional sums for interest and fraud penalties, and Dorothy said yes.

Bailey asked when she got the letter, and Dorothy said she didn't recall the date.

Bailey asked, "Since the settlement agreement?"

Dorothy said, "After the settlement."

Bailey asked if it specified an amount, and Dorothy said it didn't.

Bailey asked if subsequent information had an amount, and Dorothy said yes.

Bailey asked the amount, and Dorothy said she thought it was $2 million.

Bailey asked if her name was mentioned or both names were, and she said both.

Dorothy left the stand and Rick took the stand.

Fahrenkamp asked why it was important to make payments prior to sentencing.

Rick said, "Because the judge had ordered it to be paid and he said if not they would impose the maximum allowable by law."

Fahrenkamp asked what he wanted the court to do.

Rick said, "I would appreciate the court to enforce the agreement as it's written, that she pays her share of the civil IRS penalty as it has come out in her and my name."

He said, "I have had problems trying to sell properties."

Bailey asked if his tax attorney negotiated the civil tax liabilities, and Rick said yes.

Bailey asked, "Was it negotiated for both people?"

Rick said, "It was negotiated for both people as to whether we could get a reduction."

He said, "The amount has been reduced, for your information your honor, by about a million four from the original starting point."

Bailey asked if his criminal attorney met Miss Jones and discussed all this.

Rick said, "He never brought her name up."

Fahrenkamp finished and McIntyre asked Rick, "Where is it that you suggest that the money come from for her to put into escrow?"

Rick said, "Please, you make me nervous."

McIntyre repeated the question and Rick said, "The moneys that we referred to in this are the balances left over for the civil penalties which were agreed to and stipulated."

McIntyre asked if he didn't execute deeds provided to him, and Rick said he had not received the deeds.

McIntyre asked, "Are you willing then – I have the deeds here with me – to sign these today here in court?"

Rick said, "Not until I have an attorney."

McIntyre asked if the additional sums IRS was asking for related to fraud and interest.

Rick said, "I do not know that it's for fraud at all."

Fahrenkamp objected to a question about indemnification and said his client had very legitimate claims against Dorothy.

"To state as though she is an innocent party here is misstating the evidence and the negotiations," he said.

"She knew everything that was going on," he said.

Bailey asked Rick, "Is it your understanding upon paying an additional one point three million dollars, more or less, that would end the audit and they would no longer, being IRS, come after you or Mrs. Jones?"

Rick said, "That is my understanding."

On June 26 Bailey signed an order authorizing payments to IRS and BP.

Bailey no longer presides over the divorce, for on July 1 family court presiding judge Stephen Stobbs assigned it to Associate Judge Ellar Duff.

Stobbs carried out an order of Chief Judge Ann Callis, reassigning Bailey from family court to juvenile court.

On July 9 Judge Gilbert postponed Rick's sentencing from July 16 to July 30.

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