A Kansas businesswoman has been jailed for 18 months and ordered to pay $1.7 million to the United States Internal Revenue Services for lying under oath about her Cayman Islands businesses, which prosecutors said were used in a scheme to hide millions of dollars in offshore accounts.
Cheryl Womack, 66, who has a home and permanent residency status in the Cayman Islands, according to court records, pleaded guilty in April 2016 to testifying falsely under oath with the corrupt intent to impede an IRS investigation.
She was sentenced Monday in U.S. District Court in Kansas City.
Womack is accused of using sham nominee directors to conceal her involvement with various Cayman Islands businesses to hide from the IRS more than $6 million in income over a 20-year period.
According to a sentencing memorandum from the U.S. Department of Justice, she hid her ownership of shell companies and trusts to conceal income earned in the United States, transfer it to the Cayman Islands, and grow it tax-free until she chose to repatriate it to the U.S. This resulted in a criminal tax loss of $1,704,421, which Womack paid in restitution to the IRS after sentencing this week.
The court documents allege Womack created a web of undisclosed financial accounts, businesses, nominees and trusts in the Cayman Islands to hide income from the IRS
“Womack began her business dealings in the Cayman Islands in 1995 when she formed the captive reinsurance company MFC Insurance Company, but elected to have it file United States tax returns. She also opened personal checking and savings accounts in her own name at the Bank of Butterfield in the Cayman Islands,” according to the sentencing memorandum.
Womack failed to disclose the accounts on her tax returns. She also created several trusts at the Bank of Butterfield and used her Cayman Islands’ shell companies and trusts to evade reporting income to the IRS, the DOJ stated.
Womack, through her Cayman Islands companies, owns condominiums on Grand Cayman, which she purported to pay rent on as a means of concealing her income, and in Trump Tower in New York.
The court records further indicate that Womack used a Cayman Islands company to hide more than $500,000 in income from the sale of her wine collection at auction.
“Since the mid-1990s, Womack maintained two wine cellars in her home in Mission Hills that she used to store her personal collection of investment-grade wine. In 1996 she formed Lucy Limited in the Cayman Islands and began transferring funds to Lucy Limited, fraudulently concealed as consulting fees,” the DOJ summary of evidence indicates.
“Womack then used those funds to purchase wine for her collection. Lucy Limited kept the wine collection as an asset on its balance sheet but Womack never disclosed to the IRS her interest in Lucy Limited. In March 2008, Womack sold approximately half of her wine collection through an auction house in New York for approximately $1.6 million but did not include the revenue from that wine sale on her 2008 tax return.”
The charge of lying under oath relates to testimony from Womack at a deposition in a civil enforcement action brought by the Department of Justice in 2009 against a tax adviser known to Womack.
During the deposition, Womack gave false testimony about her links to JoJoDi Insurance Company, Lucy Limited and other Cayman Islands companies and trust.
Womack has owned and operated multiple Kansas City businesses, including an insurance company called National Association of Independent Truckers Inc., which sold in 2002 for about $35 million.
According to a sentencing memorandum from her lawyers, she is a well respected member of the Kansas business community, and the court received more than 100 character references.
“Ms. Womack’s offense conduct is completely at odds with her personality and actions as observed by her family and acquaintances, many of whom have written letters of support for this court’s consideration at sentencing. Without exception, all of the letter writers hold Ms. Womack in very high regard, telling a life story of a woman who selflessly gives her time and support to many positive activities within her community – as a mother, an entrepreneur, a friend, and a community volunteer.”
In an earlier court hearing, Womack. 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 Womack.