One of Kansas City’s highest-profile businesswomen shielded millions in income from taxes and then lied about it to federal investigators, a grand jury alleged Thursday.
V. Cheryl Womack, 62, formerly was chief executive officer of the National Association of Independent Truckers and now works as a venture capitalist.
In an indictment returned Thursday morning, grand jurors accused her of hiding some of her income in Cayman Island businesses, trusts and financial accounts. Though the indictment did not put a total on the amount of money Womack purportedly hid from tax collectors, investigators estimated the loss to U.S. government coffers at more than $7 million.
The indictment also alleged that Womack lied to FBI agents when they questioned her about foreign business interests and again lied to a U.S. Justice Department attorney about her Cayman Islands interests during a deposition.
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Womack’s attorney, Nathan F. Garrett, declined to comment, saying he had not seen the charges.
Womack, a University of Kansas graduate, made her initial fortune beginning in the early 1980s, when she founded the National Association of Independent Truckers, which sold liability insurance to independent truck drivers.
She sold that business in 2002 for more than $35 million, the indictment alleged.
Since then she has operated VCW Holding, LLC, a venture capital firm, and has chaired Leading Women Entrepreneurs of the World, which seeks to encourage women in business.
Prosecutors also noted that she maintains a single-family home with two wine cellars in Mission Hills as well as condominiums in the Cayman Islands and in New York at the Trump Tower.
Her business career has not been without its troubles.
In 2008, one of her former employees, Brandy M. Wheeler, pleaded guilty to embezzling at least $1.1 million from VCW’s accounts and eventually was sentenced to a year and a day in prison.
Last week, Womack and VCW filed a motion in federal court asking for a hearing to determine whether Wheeler was in compliance with her restitution obligations.
Also in 2008, federal lawyers brought a civil lawsuit against one of Womack’s investment advisers, alleging that he helped customers use sham management companies to avoid paying taxes.
Womack acknowledged in an interview then with The Kansas City Star that she had invested in chicken farming at the adviser’s suggestion. She also said she didn’t understand how the adviser had gotten the nickname “Dr. Poof,” purportedly for his ability to make customers’ tax liabilities disappear.
“I paid plenty of friggin’ taxes,” she told the newspaper. “I never got mine ‘poofed’ away.”
In 2010, Womack, a heavy contributor to KU athletics, emerged as a strong voice of reform as details of corruption emerged in the school’s sports ticket office.
Womack also occasionally wrote guest columns for The Star’s business section.
The 10-count, 20-page federal indictment charged Womack with one count of attempting to “Interfere with Administration of Internal Revenue Laws,” which, upon conviction, carries a maximum three-year sentence and $5,000 fine, and nine counts of making “Material False Statements to a Government Agency,” each count of which could bring up to five years in prison and a $250,000 fine.
The charges also allege how, starting in 1996, Womack allegedly opened a series of bank accounts, trusts and shell companies in the Cayman Islands “to conceal a portion of her income from the IRS.”
One such company, Lucy Limited, played a critical role told in one story told in the indictment.
Over the years, prosecutors alleged, Womack had used a Lucy Limited credit card to purchase about $1.5 million in wine, which she stored in the basement of her Mission Hills home.
At a March 15, 2008, sale at Sotheby’s in New York, Womack put more than 4,775 bottles of her collection up for auction.
“As my collection has grown,” Womack said in a press release announcing the auction, “I’ve amassed over 9,000 bottles, which is far more than can be stored in my 5,000-bottle cellar and considerably more than any one person could drink in their lifetime!”
Womack’s wine brought $1,678,900 at auction, above the high estimate of $1.6 million, leading Womack to exclaim in another press release, “I couldn’t be happier with my first experience on this side of the gavel.”
Prosecutors alleged that she should have reported at least $851,188 of that income on her tax returns.
But instead of taking her earnings back to Mission Hills, Womack ordered the auction house to make several wire transfers totaling $1,613,899.89 to a Lucy Limited account in the Caymans, the indictment charged.
And between April 2008 and January 2009, Womack wired almost $674,000 from the Lucy Limited account to a VCW Holding account in Kansas City, without declaring it as proceeds of the wine sales, prosecutors alleged.
Womack purportedly explained one of the payments as a management fee she was due, while the rest she said simply were payments on a $25,000-a-year rental agreement that Lucy Limited had to store wine in her basement.
Prosecutors said both explanations were “false and fraudulent.”
In an later interview with investigators, Womack explained that Lucy Limited was owned by investors who had “contracted with Womack to buy and sell wine on their behalf,” the indictment alleged.
But prosecutors said Thursday that no other investors existed and that “she exercised ownership, custody and control of Lucy Limited and its assets.”
The indictment alleged that Womack had established at least 19 accounts at two Cayman Island banks, both in her own name and in those of companies and trusts she controlled, and failed to report those interests to the U.S. government, as the law required.
Though once a cozy, and secret, place for tax-allergic Americans to park their money, U.S. accounts in the Cayman Islands are becoming more transparent.
Earlier this year, Cayman authorities agreed to join in enforcing the Foreign Account Tax Compliance Act, which became U.S. law in 2010. The Act requires foreign financial institutions to provide information about accounts tied to the United States.
The IRS offers a voluntary disclosure program to enable taxpayers to resolve tax liabilities and minimize criminal prosecution, U.S. Attorney Tammy Dickinson said in a written statement.
Those holding secret offshore accounts should “do the right thing,” Dickinson said.
“Taxpayers can voluntarily come back into compliance so they properly report and pay their taxes,” she said.