The former owner of a Milwaukee personal care business has been sentenced to 15 months in prison for failing to pay nearly $732,000 in payroll taxes over a 30-month period.
Kimberly Zulkowski, formerly of Brookfield, reached a plea agreement in early 2020 for failing to pay taxes withheld from employee wages while she was the owner of Faith Family Services. The company had more than $5 million in annual revenue and more than 150 employees.
Zulkowski was warned by the IRS in 2015 that she was violating federal tax law but continued to not pay all of her company’s payroll taxes, according to a U.S. Department of Justice press release announcing her sentencing.
From the fourth quarter of 2014 to the first quarter of 2017, Zulkowski failed to pay between $15,000 and almost $227,000 in payroll taxes each quarter for a total of $731,970.86, according to court documents. She did pay almost $384,000 in payroll taxes.
While the IRS had begun to work with Zulkowski on her tax obligations, in mid-2016 she allegedly began moving money from Faith Family Service accounts to her personal and other business accounts. From June 2017 to April 2018, she withdrew $1.5 million “to purchase a home in Mexico and to subsidize her development of movies and other theatrical productions,” according to government court filings.
“Individuals and businesses who cheat on their taxes not only undermine the government’s ability to fund vital and necessary programs but also effectively steal from their fellow citizens,” Richard Frohling, U.S. Attorney for the Eastern District of Wisconsin, said in a press release.
Prosecutors had sought a 24-month prison sentence while Zulkowski’s attorneys argued for probation or supervised release.
U.S. District Judge J.P. Stadtmueller ultimately sentenced her to 15 months in prison, 3 years of supervised release and a requirement to pay $731,970 in restitution.
In the run-up to Zulkowski’s sentencing, prosecutors also accused her of attempting to use Paycheck Protection Program funds to pay restitution in the case. In its sentencing memorandum, the government said Zulkowski transferred the business to her romantic and business partner for no compensation. The partner, Stephen Curtis, was then able to get a PPP loan for almost $357,000 in April 2021.
The next month, Curtis transferred $150,000 to his own personal bank accounts and then transferred $149,500 to Zulkowski, according to court documents.
The day after the transfer, Zulkowski paid $149,751 to the court for her restitution, according to court documents.
“Defendant did not simply ‘rob Peter to pay Paul,’” the sentencing memorandum said. “She robbed Peter; was told to stop robbing Peter; kept robbing Peter anyway; was convicted of robbing Peter; her partner robbed Peter; and then she attempted to pay Peter back with his own money.”
Zulkowski’s attorney objected to the government’s characterization of the transfer of the business and the PPP loan, noting that the purchase agreement required Curtis to pay roughly $127,000 for the business and the bank accounts had more than the amount transferred prior to receiving the PPP loan.
“In short, there is no smoking gun, no robbery, no Peter nor Paul. There is, however, plenty of smoke generated by the prosecution playing fast and loose with the facts in order to make the best case possible to paint Ms. Zulkowski as one of the ‘most hardened criminals sentenced by this court,’” Daniel Welytok of von Briesen & Roper wrote in his objection in March.
Welytok also pointed out that Zulkowski has serious health issues putting her at higher risk for contracting COVID-19, arguing she should be put on supervised release.
He also noted she has fostered more than 30 children over the years and had her own difficult childhood, including abuse.
“She is an extremely protective and loving mother,” Welytok wrote, noting she has biological and non-biological children at home, including two newborn infants.
