Grand jury indicts former truck insurance group CEO on $7 million tax scheme

By Greg Grisolano, Land Line staff writer | 12/16/2013

A Kansas City-area business woman with ties to the commercial trucking industry has been indicted in federal court on a multimillion-dollar income tax evasion scheme.

Verna Cheryl Womack, 62, is facing a 10-count indictment that includes one count of attempts to interfere with administration of internal revenue laws, and nine counts of material false statements to a government agency, according to documents on file in U.S. District Court for the Western District of Missouri.

The indictment was returned on Dec. 12, and the taxes owed are estimated to be more than $7 million.

Womack was formerly the CEO of the National Association of Independent Truckers, which sold liability insurance to independent truckers. She founded the business in the 1980s and cashed out for more than $35 million when she sold the business in 2002. She then started her own venture capital firm, VCW Holding LLC. 

A request for comment sent to Womack’s attorney on Monday was not immediately returned.

The indictment states that beginning in or about 1996 and continuing to the date of the indictment, Womack “corruptly endeavored … to obstruct and impede the due administration of the internal revenue laws of the United States.”

Womack opened a series of bank accounts and nominee companies and trusts in the Cayman Islands to conceal a portion of her income from the IRS.

“At all times, Womack exercised control over the nominee companies and trusts, and they were maintained for her financial benefit,” the indictment stated. “When necessary to maintain her control, Womack appointed family members and employees as directors of the nominee companies and trusts, sometimes without their knowledge. As part of her corrupt endeavors, Womack repeatedly failed, year after year, to report her financial interests in her nominee companies and trusts to the IRS despite the multiple legal requirements that, as a United States citizen, she do so.”

The indictment further alleges that Womack established at least 19 accounts at various banks in the Caymans. For the calendar years 2005 through 2008, Womack maintained balances between $40,964 and $173,541 in one of those accounts, but failed to report her financial interests to the IRS.

In a press release issued Thursday, U.S. Attorney Tammy Dickinson cited one example of the way in which Womack is alleged to have used her nominee companies to conceal income from the IRS.

The company, Lucy Limited, owned a wine collection that was stored in the basement of Womack’s Mission Hills, Kan., residence. Womack reportedly used a credit card issued by her Cayman bank in the company’s name to purchase at least part of the wine for her collection, for which she paid approximately $1.5 million over the course of several years.

“On March 15, 2008, Womack sold approximately half of the wine stored in her basement at an auction house in New York for $1.6 million,” Dickinson’s release stated. “The indictment alleges that she attempted to use her nominee company, Lucy Limited, and its financial accounts at the Bank of Butterfield in Grand Cayman to conceal the revenues and profits she derived from the sale of the wine.”

Following the sale, the indictment states Womack personally directed the auction house to wire more than $1.6 million in a series of transfers to a Lucy Limited account that Womack controlled. Womack allegedly employed a number of false and fraudulent business agreements that appeared to be arm’s length transactions, but were in fact Womack’s self-dealing, resulting in wires of those proceeds back to the United States for Womack’s personal use.

The indictment alleges that a $298,957 wire transfer was falsely and fraudulently represented in Lucy Limited’s financial statements as a management fee due to Womack. Womack also allegedly created a false and fraudulent document purporting to be a lease agreement between herself and Lucy Limited. Although not created until October 2008, the indictment says, the false and fraudulent lease agreement stated that Lucy Limited would lease the wine cellars in the basement of Womack’s Mission Hills residence for $25,000 per year beginning in 1995 and continuing through at least 2009.

The day after creating that fraudulent document, Womack caused a $350,000 wire transfer from the wine auction proceeds to be wired to a bank account under her control in Kansas City, Mo. According to the indictment, Womack falsely and fraudulently represented in Lucy Limited’s financial statements that this wire transfer was payment for rent due under the lease agreement for the years 1995 through 2008.

As a result of her efforts to disguise the self-dealing nature of these transactions, the indictment says, Womack did not report the income she derived from the sale of the wine on her federal tax return. She did not disclose her control of Lucy Limited or the existence of its bank account to the IRS, the indictment says, and she did not properly report the profit she derived from that sale – at least $851,188 – on her tax return.

Dickinson’s release also stated that federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. 

“U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year,” the release stated. “Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.”

In March of 2010, a new Foreign Account Tax Compliance Act (FATCA) became law in the United States and is taking effect abroad on a country-by-country basis. The IRS and law enforcement are now more readily able to obtain the records of Americans holding foreign bank accounts in countries, including Switzerland, the Cayman Islands and Costa Rica. FATCA requires foreign financial institutions to report the holdings of U.S. taxpayers to the IRS, or else face serious penalties.

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