Owner withheld taxes from workers’ paychecks and used money for yacht, Jeep, feds say
A Virginia business owner withheld taxes from her employees’ paychecks for years, but she never paid them to the IRS, prosecutors said. Instead, she bought a 60-foot yacht, a boat and a Jeep for her daughter.
She pleaded guilty and now may face prison time.
On May 3, Wendy Brockenbrough, from Virginia Beach, pleaded guilty to willfully failing to pay over taxes to the IRS, according to a news release from the U.S. Attorney’s Office for the Eastern District of Virginia.
In a statement shared with McClatchy News on May 5, Brockenbrough’s attorney, James Broccoletti, said the woman “has accepted full responsibility for her actions and has extreme remorse. She has pled guilty quickly to demonstrate that. In addition she has paid back almost half of the outstanding restitution and is committed to making the government whole.”
The 53-year-old is the owner of three businesses in Virginia, according to court documents obtained by McClatchy News. As a majority owner, her responsibilities included managing the books and finances of her companies as well as withholding employment taxes from her employees’ paychecks and paying that amount over to the IRS.
Prosecutors said between 2011 and 2019, the woman failed to pay over the taxes she collected from her workers’ paychecks.
For years, authorities said she also failed to file Form 941, Employer’s Quarterly Federal Tax Return.
While Brockenbrough withheld an appropriate amount of payroll taxes from her employees’ paychecks, she never sent the payments to the IRS, and instead kept the money for herself, court documents show.
“Brockenbrough had ample funds in her companies’ bank accounts to make the required payroll tax payments,” prosecutors said.
Instead of paying the taxes, prosecutors said the woman lived a “lavish lifestyle,” which included buying a 60-foot yacht worth about $820,000, a $126,000-center console boat and a $41,000 Jeep Wrangler that she gave to her daughter.
Authorities said they estimate Brockenbrough cheated the IRS out of $2,721,268.
Prosecutors said accountants at the firm repeatedly reminded the owner of her responsibilities to pay the taxes. Court documents state Brockenbrough lied to the accountants, claiming she made the payments using a company credit card.
Court documents show the woman altered a bank statement to pretend the taxes had been paid. She also provided her accountants with false W-2s forms and false QuickBooks entries to reflect bogus payments.
By submitting one of the false W-2 forms to the IRS, Brockenbrough once received a tax refund of about $27,000, prosecutors said.
Parts of the scheme began to come to light in 2018-19 after the Commonwealth of Virginia audited Brockenbrough, with officials finding she owed the state about $500,000 in unpaid state payroll taxes. The woman paid a $200,000 lump sum and sent $20,000 each month to the state.
However, after her audit, prosecutors said she continued to falsify QuickBooks records and didn’t tell her accountants about the audit.
Brockenbrough’s sentencing is scheduled for September 8, according to the release. She faces a maximum of 15 years in prison, though typical sentences are shorter than the federal maximums.
As part of her plea agreement, the owner agreed to file “true and correct tax returns for the year(s) 2017-2019 within sixty days and to pay all taxes, interest, and penalties” for these years.
This story was originally published May 5, 2022 at 11:06 AM with the headline "Owner withheld taxes from workers’ paychecks and used money for yacht, Jeep, feds say."
