Businesswoman contests release of Cayman bank records

A high-profile businesswoman accused of using Cayman Islands bank accounts to dodge more than $7 million in taxes is seeking to challenge the use of information obtained by the U.S. Internal Revenue Service through a tax information exchange request.

Cheryl Womack, a Kansas City businesswoman who has a home and permanent residency status in the Cayman Islands, is accused of opening at least 19 bank accounts and organizing a series of trusts and nominee companies in the territory to hide income from the IRS.

Ms. Womack has been charged with one count of attempting to interfere with the administration of IRS laws and nine counts of making false statements to a government agency.

While the allegations relate to a significant tax-avoidance scheme, there are no formal tax evasion or tax fraud charges on the 10-count indictment. On that basis, her lawyers have outlined plans to contest the use of a Tax Information Exchange Agreement between the Cayman Islands and the United States to obtain evidence against her.

The challenge could have broader implications for how TIEAs – essentially a search warrant for foreign documents and bank records – are used in criminal tax investigations in the Cayman Islands.

In a court filing last week, attorneys acting on behalf of Ms. Womack, accuse the government of intentionally restricting access to the agreement to prevent scrutiny of the “improper execution” of the TIEA.

The filing requests full disclosure of the TIEA application to Ms. Womack’s defense team, suggesting that some of the evidence against her could ultimately be inadmissible.

“TIEA applications may only be executed on the Cayman Islands to investigate or prosecute criminal tax evasion, and TIEA application must include a truthful representation regarding the charges in the United States,” Ms. Womack’s attorneys wrote in an application for a court order for the full agreement to be made available to the defense.

In the court filing, the lawyers argue that if the information about Ms. Womack’s bank accounts was obtained on the basis that she was likely to be charged with tax evasion, then it should not be used in any court action.

It states, “TIEA applications are similar to applications for a search warrant in that, before evidence can be obtained pursuant to a TIEA, strict procedural requirements must be met to ensure that the rights of the individual under investigation-and the rights of a sovereign nation-are protected.”

Ms. Womack is accused of using various nominee companies in the Cayman Islands, including a business called Lucy Limited, to conceal income from the IRS.

The indictment alleges she exercised complete ownership, custody and control over Lucy Limited and its assets, which included a wine collection stored in the basement of her Kansas home.

She is said to have sold approximately half the wine collection at a profit at an auction in New York, and arranging for the income to be wired to Lucy Limited’s accounts in the Cayman Islands, gaining access to the funds through a series of fraudulent business agreements.

Last week’s court filing focused on how authorities gained access to information about Ms. Womack’s Cayman accounts through the TIEA application.

It says such applications have specific requirements for how information can be obtained and how it can be used, including that the information gathered can be used only in tax evasion cases.

Up to now, the lawyers say, the government has not released a copy of the agreement to the defense, allowing only restricted access.

In earlier court documents, Ms. Womack’s legal team has indicated that she may change her plea but only on a “limited basis.” They requested disclosure of the TIEA on Wednesday to help prepare their case – that aspects of the evidence should be “suppressed” in any sentencing hearing or trial.

They add that the original basis for requesting permission for information on Ms. Womack’s bank accounts came from evidence obtained from a computer stolen by a former employee of the businesswoman, potentially making it inadmissible.

Ms. Womack has owned and operated multiple Kansas City businesses, including venture capital firm VCW Holding Co. LLC. She sold several of her companies in 2002 for about $35 million.

A press release issued by Cayman Enterprise City in February 2013 identifies Ms. Womack as the CEO of WAT Ltd. in Cayman’s special economic zone, and links to a website about a waste-to-energy company.

In an earlier court hearing, Ms. Womack, who was indicted last December, sought to challenge the confiscation of her passport, arguing that she needed to make a trip to the Cayman Islands to discuss a waste-to-energy business deal. Politicians in the territory said they knew nothing of the trip or any deal with Ms. Womack.

In 2013, an information request by the Australian tax authorities was successfully challenged in the Cayman Island Grand Court. Since the Cayman Islands Tax Information Authority failed to notify the companies involved of the jurisdiction making the request and the general nature of the information sought, producing the information infringed on their rights to “a fair and public hearing” and their “rights to privacy” under Articles 7 and 9 of the Cayman Islands Bill of Rights, the Grand Court ruled.

According to the judgment, the Cayman Islands Tax Information Authority had also failed to ensure that the information requested by the Australian Taxation Office related only to tax years and taxable periods after July 1, 2010, as prescribed by the tax information exchange agreement.

However, despite the judgment, an Australian federal court allowed the records obtained from Cayman to be admitted as evidence in the Australian proceedings. The Australian court considered the Grand Court decision a matter of domestic Cayman law that did not affect the lawfulness of the Australian tax office receiving the material.

Cayman Compass journalist Michael Klein contributed to this story.

1 COMMENT

  1. At all cost the Government need to stand firm and protect our citizens, whether there are imported or not. I do not know the facts about Ms Womack’s case but I am sure there are familiar circumstances all over the world. People work and trade and make billions and millions here in Cayman, and they take it away and invest in other places. Does the Government ever follow their trail and want to prosecute them. What is the difference. You know something, one may sometimes wonder why it is it that USA makes it their business to get into everything. Which place on earth in the world is more involved in wrong doing? Just think of how mush all our lives have become a state of living in fear, afraid to travel by boat plane or donkey. Focus on the Middle East and why the war will never ever end in our life time. What is the true reason behind ISIS. Has any of you investigated the truth about the USA dollar bill and the pyramid with the all seeing eye, or you just spend and don’t care? Control Power and money go hand in hand, a spreading evil disease which has came even to our shores. Take a step back folks and look at the big picture.

  2. Twyla, although you certainly have the right to voice your opinion on things, you may want to have someone read what it is you are posting before you actually post it. From reading your past posts, I always reconigized that you were rather Optspoken on a variety of issues, but your post below just makes you look even more like a quack. Before you start slamming the USA and rambling on about the US Dollar like a conspiracy theorist, maybe you should get your facts straight.

  3. Twyla, I can easily explain to you why the USA makes it their business to get into everything especially when it comes to taxes. It is simply because that’s how they pay for all their activities and infrastructure. The biggest crime in the USA isto keep money out of Uncle Sams pocket. This is a normal tactic used to bring down big names that they can’t get using other means such a gangsters like Al Capone or wealthy businesses owners that they feel should give them more just because they have it and if you’re the little man don’t miss even a small payment or they will take the shirt of your back. On the average the 30-40 Percent of everything you earn belongs to the IRS. That includes income, winnings even money left to you from your parents which by the way was already taxed.
    As far as protecting imported Citizens in Cayman, you should know better that to make that statement and not expect to get blasted. For the most part Caymanians harbor resentment to anyone that is not considered a Born Caymanian, so Permanent Residence or Status actually mean nothing when it comes to getting excepted into Caymanian society. Whether she did anything wrong or not I am sure the most would like to see her fry just for the hell of it.

  4. Here’s a good analogy of how US Taxation works. If I give you 1 Dollar, by law you are supposed to give the IRS 30 Cent, leaving you 70 Cents, if you in turn give that 70 cents to someone else they are supposed to give the IRS 20 Cents leaving 50 Cent which if given to someone else will only mean 35 Cents for them, In a nutshell as the money changes hands it will eventually all end up in the pockets of the IRS.

  5. Oh Ms Vargas, I know you like a little rant, but this is more ridiculous than anything we have heard from you before!
    Ms Mcoubry suggests you get your facts straight, let me help:
    A citizen of the US is taxable on income worldwide.
    The Tax information Exchange agreement is just that, and Cayman has signed one with the US.
    To avoid tax by hiding income or assets is a crime in the US, and here I am presuming that the US believes tax is being avoided.
    So, if the businesswoman in this case is a US citizen, tax is due on Cayman income, she should not fear anything from the information being released, unless, of course?

    You see, it is simple, so next time, check a few facts before spouting nonsense that seems to originate in the Da Vinci Code!

  6. I wonder who bears the cost of the administration of these requests?

    Perhaps there should be a 1000 dollar admin fee, and a percentage of the taxes recouped…

  7. Arthur is correct in what he is saying, she is entitled to pay taxes on any income she makes no matter where it’s earned as long as she holds US Citizenship, if she doesn’t want this she can apply for Status and give up her US citizenship and show her commitment to investing in Cayman like Dart did. If that were the case I say yeah it’s none of the IRS’s business. But since she wants to hold on to her US ties this is the price she has to pay.

  8. Nicole I only have two things to respond to your comments.
    1 Please tell the readers where in my comments I am wrong. and
    2 When last did you check your bath tub?……….. I thought so sorry you missed the quack.

  9. Arthur Rank once you keep cycling I am sure you will eventually end up on the right path instead of getting lost in the village and being an idiot.

  10. Arthur Rank I want you to understand one thing, I am no Licky licky Caymanian Woman, so when ever you disagree with anything I say, then disagree, that is your democratic right. But however, bear in mind that when you call up mi name and try to disrespect me I WILL TAKE YOU ON. Trust me on that.,

  11. Everyone has the right to their own opinion, but let’s try our best to base our comments on our opinion of the article itself or others opinion of the article not your personal opinion of someone you don’t even know. These debates are very informative and the comment give great insight into what’s on peoples mind so lets not turn comments into personal attacks and on the other side lets not take them personal.

  12. Yes Michael, I agree with you, these discussions are useful, and so far as I am concerned have to do with the comments as written, On this particular issue, Ms Vargas original post started out as silly, descended into nonsense, and I feel bound to say so! If it seems like a personal attack, thats a shame, it isn’t intended as such.

  13. Thanks for Clarifying that Arthur and hopefully Ms Vargus doesn’t take it as a personal attack directed at her. I happen to always appreciate her contributions whether I agree with them or not..

    Don’t sweat it Twyla..We’re always happy to hear your thoughts, please keep them coming..

  14. Mr Michael I believe you are a very decent Man citizen and a gentleman. I also appreciate that you have the intelligence to know how to let a person know when they may be wrong about something’s Of course I maybe correct about many things I cannot be right about all things.
    Arthur Rank it seems you just cannot get over what has happened to you. Well trust me you might as well get rid of it, because I am going no where. Further more you can only express your idiotic ways on line, you do not have the Gall to have a face off. So I say do not blame me for your misfortunes If you were the correct man you would not be moaning and blaming every one for your mistakes.

  15. Mr Michael, thanks for the advice you have given.
    Arthur will always be negative towards me, while having no good reason to. Anyway I am done I take your advice.

  16. Ms Vargus, I have to say that you simply dont make any sense, I simply want to address issues, so when you talk about get over what has happened to you, dont blame me for your misfortunes and blaming everyone for your mistakes I really wonder about your ability to even read, it relates to nothing that has been written here, so it must be something in your head!
    So I bow out of this stupid exchange.

Comments are closed.