DOJ charges Texas billionaire in $2 billion tax fraud

DOJ charges Texas billionaire in $2 billion tax fraud

An indictment filed earlier this month alleges that Brockman, the chief executive of Reynolds and Reynolds, an Ohio-based company that makes software for vehicle dealerships, used a network of entities in Bermuda and Nevis to hide investment income from the IRS. Brockman was also charged with money laundering and other crimes. Smith is CEO of Vista Equity Partners, which owns a substantial stake in Vivid Seats.

Billionaire businessman Robert Smith, who made headlines previous year by promising to pay off school loans taken on by hundreds of Black students, has reached a deal with U.S. authorities to stave off prosecution for tax fraud.

The United States attorney in San Francisco, David Anderson, told a media briefing "the allegation of a US$2 billion tax fraud is the largest ever tax charge against an individual in the United States".

In addition to the tax offences, the indictment alleges that, between 2008 and 2010, Brockman engaged in a fraudulent scheme to obtain approximately $67.8 million in the software company's debt securities.

Prosecutors described how Brockman went to considerable lengths to maintain secrecy, using an encrypted e-mail system to communicate with nominees, to whom he gave code names including Redfish, King, Bonefish and Snapper.

Messrs. Brockman's and Smith's alleged tax evasion was "brazen, intentional and significant", said Jim Lee, chief of criminal investigations for the Internal Revenue Service. He entered a plea of not guilty to all counts and was released on $1 million bond, said Abraham Simmons, spokesman for the Northern District of California.

"We look forward to defending him against these charges", said Brockman attorney Kathryn Keneally.

Under the terms of the settlement deal, Mr. Smith would pay off $139 million in punitive measures and back taxes, however, he will not be prosecuted.

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The announcement of a non-prosecution agreement for Mr. Smith was unprecedented, said Jeffrey Neiman, a former federal tax prosecutor.

But Mr. Anderson said that Mr. Smith "has accepted responsibility and provided "complete and truthful cooperation". Smith's agreement to cooperate has put him on a path away from indictment".

While some of the money in the offshore entity ultimately went into Fund II Foundation, a charity Mr. Smith created in 2014, he withdrew untaxed funds for his personal benefit from 2005 to 2013, according to a statement he signed with prosecutors on October 9.

According to newly unsealed docs, Brockman, whose net worth is $1 billion, formed companies on the British Virgin Islands and used them to hide assets from the IRS. After this rejection, he continued to file false tax reports for years until becoming caught up in the Brockman investigation. He also allegedly had secret bank accounts in Bermuda and Switzerland, where he funneled untaxed profits from selling assets.

Prosecutors say that Smith used about $2.5 million in untaxed funds to buy and upgrade a vacation home in Sonoma, Calif.; purchase two ski properties in France; and spend $13 million to buy a property and fund charitable activities at his property in Colorado.

As the CEO of Reynolds & Reynolds, Brockman oversees one of the largest vendors of software to manage auto dealerships in the US and overseas.

While little known on Wall Street, Mr. Brockman helped launch the career of Mr. Smith, who has become the wealthiest Black person in the US and one of the private-equity industry's most prominent figures, thanks to his firm's high returns and unique strategy for turning around software companies - as well as his own splashy philanthropy.

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